Voting in Referendum 2011 starts next Tuesday, January 18, and continues through February 17. Some have suggested vote “No” on everything; some have suggested vote “Yes.” It is up to each Texas lawyer to vote responsibly by studying the proposed rules independently before casting a vote. This post is in response to many requests for information about statements circulated among members of the Bar. Below are six statements you may have heard or read and some clarifying information. Additional statements will be addressed soon. 

YOU MAY HAVE HEARD/READ: “Proposed Rule 1.07 requires lawyers to give clients what are in effect ‘Miranda warnings.’ And some of the Miranda warnings make no sense. For example, if co-clients disagree on an issue, the required warning says that they must resolve the issues themselves ‘without the lawyers advice,’ even if the clients want the lawyer to tell them what the controlling law is on the issue or provide other simple advice that they both request.”

CLARIFICATION: Aside from the fact that the disclosures in Proposed Rule 1.07 are intended to enlighten the listener, they have nothing in common with Miranda warnings. The disclosures in the proposed rule are intended to make clients aware of the implications of a lawyer representing multiple clients in the same matter. Under the proposed rule, the lawyer must tell clients that they “must be willing” to make independent decisions without the lawyer’s advice to resolve issues that arise among them. This is because the lawyer cannot advocate for one client against any other client in the matter. See the full text of proposed Rule 1.07(a)(2)(ii) and comment 8.

YOU MAY HAVE HEARD/READ: “Proposed Comment 8 to Rule 1.07 says lawyers must make several ‘determinations’ before agreeing to represent multiple clients in a case or matter.”

CLARIFICATION: Comment 8, like other comments to the proposed rules, does not require lawyers to take any action. Instead, the comment explains determinations a lawyer “should” make. As paragraph 7 in the Preamble states, the comments do not add obligations to the rules, and no disciplinary action may be taken solely for a lawyer’s failure to conform to comments.

YOU MAY HAVE HEARD/READ: “Comment 7 to Rule 1.09 misstates the long-standing definition of when two matters are ‘substantially-related’ as defined by Texas courts. This point is critical in determining conflicts-of-interest. The 20+ year Coker precedent, repeatedly reaffirmed by the Texas Supreme Court, defined ‘substantially related’ as whether the facts of two matters are so related that they create a genuine risk that the confidential information of a former client will be violated. Inexplicably Comment 7 declares that the test is whether the facts and issues are similar. The Comment attempts to change longstanding, substantive law declared by the Texas Supreme Court.”

CLARIFICATION: Comment 7 to proposed Rule 1.09 is consistent with precedent. In an opinion that postdates and cites NCNB Texas National Bank v. Coker, 765 S.W.2d 398 (Tex. 1989), the Supreme Court of Texas asserted: “We have held that two matters are ‘substantially related’ within the meaning of Rule 1.09 when a genuine threat exists that a lawyer may divulge in one matter confidential information obtained in the other because the facts and issues involved in both are so similar.” In re Epic Holdings, Inc., 985 S.W.2d 41, 51 (Tex. 1998) (emphasis added) (citing Texaco, Inc. v. Garcia, 891 S.W.2d 255, 256–257 (Tex. 1995) (per curiam); Coker, 765 S.W.2d at 400; Metropolitan Life Ins. Co. v. Syntek Finance Corp., 881 S.W.2d 319, 320–321 (Tex. 1994) (per curiam); Tex. Disciplinary R. Prof’l Conduct 1.09, cmt. 4B, reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (1998) (Tex. State Bar R. art. X, § 9)), quoted in Landers v. State, 229 S.W.3d 532, 535 (Tex. App.—Texarkana 2007), aff’d 256 S.W.3d 295 (Tex. Crim. App. 2008); see also Nat’l Med. Enters., Inc. v. Godbey, 924 S.W.2d 123, 129 (Tex. 1996) (“The pending action is substantially related to the prior investigations and lawsuits involving NME and Cronen, as the district court found. The allegations throughout are identical in all material respects. See Texaco, Inc. v. Garcia, 891 S.W.2d 255, 257 (Tex. 1995) (holding two distinct claims were substantially related due to the existence of similar liability issues, scientific issues, and defenses).”). 

YOU MAY HAVE HEARD/READ: “The proposed rules will turn fee collection in the criminal defense world on its head.”

CLARIFICATION: This concern may be a reference to proposed Rule 1.15 (regarding safekeeping of property). Comment 12 to that rule says, “Applicable law, not these Rules, determines when a fee is earned.” Criminal defense counsel should review the law on commingling client and lawyer funds when the lawyer has possession of unearned fees. The proposed rule does not (and could not) change this law, and it does not change how the existing rule handles a flat fee.

YOU MAY HAVE HEARD/READ: “Proposed Rule 1.08 contains standards that are inconsistent with a lawyer’s fiduciary duties. Rule 1.08(a) would permit a lawyer-client business transaction if ‘the lawyer reasonably believes that the terms of the transactions … are fair and reasonable to the client.’ But the fiduciary standard requires that the transaction be objectively fair and reasonable to the client.”

CLARIFICATION: Proposed Rule 1.08(a) does nothing to undermine when lawyers may be sued for breach of fiduciary duty by specific clients they have harmed. The “reasonably believes” standard recognizes that a lawyer defending against a disciplinary complaint that he or she had entered into a transaction with a client that was not “fair and reasonable” would necessarily present the objective view of a “reasonable” lawyer in the same circumstance. The “reasonably believes” standard is implicit in the existing rule. Making the standard explicit will provide a clear defense for a lawyer who acted reasonably when entering into a business transaction with a client.

YOU MAY HAVE HEARD/READ: “The Bar Board asked the Supreme Court for more time to address the conflict of interest rules, but the Court refused to grant that extension.”

CLARIFICATION: In a letter dated October 1, 2010, State Bar President Terry Tottenham conveyed to the Court the State Bar Board of Directors’ recommendation that the Court allow the Board more time to consider proposed Rules 1.06 through 1.09. The Court allowed the Board until November 8, 2010 to collect more information and to provide final recommendations. During the extended review period, Bar leaders re-opened the public-comment period, hosted a meeting of ethics counsel to discuss proposed Rules 1.06 through 1.09, and held a special Board meeting during which directors took final votes on the proposed rules. Proposed Rules 1.06 and 1.07 were modified further in response to the input received in the extended review period.

Patricia D. Chamblin
Chair, Texas Disciplinary Rules of Professional Conduct Committee

Linda S. Eads
Past Chair, Texas Disciplinary Rules of Professional Conduct Committee

Lillian B. Hardwick
Past Chair, Texas Disciplinary Rules of Professional Conduct Committee

Additional information regarding the proposed rules is posted at www.texasbar.com/rulesupdate. Exercise your right to vote responsibly by taking the time necessary to understand the issues and options yourself before casting your vote on the proposed rules.